If you have decided to buy a property with the intent of renting it out for commercial gain, you must keep accurate records and pay close attention to your tax affairs. You will certainly need to treat this as a business venture and may need to bring in a qualified accountant to advise you accordingly. However, whatever approach you take, you must avoid any unwanted issues should the tax authority take a closer look. So what are some key areas to focus on as you plot your path?

Preparing Your Approach

As you may know, the tax code allows you to claim certain deductions when you rent out a property. If you do so, ensure that you keep copious records so there is never any question and you do not need to rely on your memory.

Keeping Good Records

In this case, note the date the expense was incurred together with the supplier's name. You should describe the products or services supplied in precise detail as you itemise the cost of the expense. The tax authority is allowed to ask for proof of any claim, and if there is any ambiguity, it'll be disallowed. Also, you may need to pay penalties for underreporting as well as interest, so if the amounts in question are significant, you can see how this would be problematic.

Claiming Expenses

Nevertheless, you can still claim expenses in a variety of different areas. For example, you may need to outsource property management to a professional company; these fees are tax-deductible. The council rates you pay on the property can also be itemised, as can your insurance premiums. If you need to take out a loan in order to pay for some repairs, the interest (but not the primary sum) can be shown on your tax return, and you may be able to depreciate capital works.

Apportioning Tax Deductions

Some people get into trouble when they claim 100% of any expense but may only hire out their property on a part-time basis. If they use the house for personal trips every now and again, this will need to be prorated. You cannot claim expenses that relate to your personal visits.

Qualifying Rental Income

Also, remember that you may need to include any payouts from an insurance company as rental income. So, if you need to claim because a tenant damaged the property in some way, make sure you adjust accordingly. Likewise, if you need to retain a bond deposit to pay for some damages, this needs to be treated as rental income too.

Bringing in Professional Help

Clearly, there are a lot of points to take into consideration. Reach out to a business tax accounting services firm to learn more.

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